Conygar Investment Company PLC (LON:CIC) have today provided interim results for the six months ended 31 March 2022.
Summary
· Net asset value (“NAV”) increased by £12.44 million to £126.58 million (212.25p per share), including a £10.52 million uplift from the placing of 7,139,000 of the Company’s own shares.
· NAV per share decreased by 5.16p per share to 212.25p as a result of 8.58p per share dilution from issuing shares at a discount, partly offset by a 3.42p per share increase from the £1.93 million profit realised in the period.
· Total cash deposits of £30.66 million (51.41p per share).
· No debt and no borrowings.
· Development progressed for the first phase of the mixed-use project at The Island Quarter, Nottingham, planned for opening in the summer of 2022.
· Disposal of the industrial units at Selly Oak, Birmingham, completed in December 2021, realising a net profit of £3.42 million.
· Disposal of the retail park at Cross Hands, Carmarthenshire, for £18.28 million realising a £0.53 million surplus over the 30 September 2021 valuation.
· A further planning application was submitted in October 2021 for the proposed mixed-use waterfront development in Holyhead, Anglesey, supplementing the outline consent granted in 2014.
· A non-binding exclusivity agreement was entered into with Wholesale Fruit Centre (Bristol) Limited in connection with the potential acquisition of a 14.7-acre development at the Bristol Fruitmarket site in the St Philip’s Marsh area of Bristol.
Group net assets summary
| 31 Mar 2022£’m | 31 Mar 2021£’m | 30 Sept 2021£’m | |||
| Properties | 99.34 | 62.24 | 108.44 | ||
| Cash | 30.66 | 23.93 | 13.66 | ||
| Other | 0.57 | 0.49 | (0.66) | ||
| Provisions | (3.99) | – | (7.30) | ||
| Total | 126.58 | 86.66 | 114.14 | ||
| NAV per share | 212.25p | 163.97p | 217.41p |
Robert Ware, Conygar Investment Company Chief Executive commented:
“The soon to be opening up and ongoing development programme at The Island Quarter site in Nottingham in conjunction with the resurgence of interest in a nuclear capability in Anglesey leaves the Group well placed to benefit from the post-pandemic economic bounce and strong demand for high quality, sustainable, UK real estate, particularly in the residential rental market.
Although the further advancement of our development portfolio will require a substantial investment by third-parties we are confident that there is significant interest which will become clearer over the year.”
Chairman’s and Chief Executive’s statement
Results summary
The Group achieved a profit of £1.93 million in the period (year ended 30 September 2021: profit of £26.53 million). This arose from completion of the forward sale of our industrial units at Selly Oak, Birmingham, and the sale of our retail park at Cross Hands, Carmarthenshire, which gave rise to a combined net profit, before administrative and other operational costs, of £3.84 million. These sales, in addition to the placing of 7.14 million shares in December 2021, generated gross cash proceeds in the period of over £36 million.
Whilst this is a pleasing result, that has enabled the continued progression of our exciting mixed-use development at The Island Quarter site in Nottingham, it should be noted that the share placing at a discounted price of 150p, after adjusting for realised profits, has resulted in a net reduction of the Group’s net asset value per share in the period of 5.16p (2.37%) to 212.25p per share as at 31 March 2022 (30 September 2021: 217.41p).
The Island Quarter, Nottingham
Just over 5 years since we first acquired The Island Quarter site, we are delighted to see the first phase of this substantial regeneration project nearing practical completion with the food, beverage and events venue at Canal Turn to be fitted out over the coming weeks in advance of a planned opening in the summer.
Canal Turn comprises an outside performance area, restaurants, bars, extensive events space for private hire and a rooftop terrace which will provide an exciting, new and unique destination for the city to be managed and operated by a local Nottingham team. The venue’s two restaurants, “Binks Yard” and “Cleaver & Wake”, will be led by the 2018 MasterChef: The Professionals winner and chef patron Laurence Henry. Binks Yard will provide an all-day dining, drinking and entertainment venue whilst the Cleaver & Wake restaurant will offer a modern dining experience using the best nationally sourced produce.
We anticipate that the detailed application for the plot adjacent to Canal Turn, which incorporates proposals for two hotels, to be managed by Intercontinental Hotels Group, co-working space, 247 build to rent apartments plus an extensive food and beverage offering, will be granted by the summer.
Furthermore, ground preparation works have been carried out for the now fully consented 700-bed student accommodation scheme to enable commencement of this development in the summer of 2022 and completion in good time for the September 2024 student intake.
We continue to progress the designs for subsequent phases and are in advanced discussions with potential lenders to finance both the student accommodation development as well as later phases of the project and expect to make announcements in that regard over the coming months.
For this Interim Report we have not sourced a third-party valuation for The Island Quarter site. The Conygar Board have, however, considered its fair value by reference to any changes in the assumptions set out in the reported 30 September 2021 valuation provided by Knight Frank LLP, progression of the project and the recoverability of costs incurred since that date. During the period, no planning permissions have been granted or buildings completed and whilst we recognise the impact that price inflation is currently having upon property construction costs, we are seeing these increases being offset by a corresponding uplift in market rents, particularly within the residential build to rent and student accommodation sectors. However, there have been significant cash outlays in the period to bring electricity to the site and progress the construction of Canal Turn. As such the fair value at 31 March 2022 has been increased by £11.91 million to £82.41 million to reflect the development costs incurred in the six-months since 30 September 2021.
Other projects
At Cross Hands, Carmarthenshire, we were able to benefit from the pandemic bounce in retail warehousing values by accepting an offer to purchase our retail park for net proceeds of £18.28 million. The sale, which completed in February 2022, generated a profit in the period, after final development and sale costs, of £0.42 million. Further capital profits of £3.51 million were recognised, by way of revaluation surpluses, in prior periods which, in addition to £1.22 million of post development rental surpluses, has resulted in a total profit from the park of £5.15 million.
The granting, by Birmingham City Council, of their consent to a student home scheme at our site at Selly Oak enabled completion of the sale to a specialist provider of student accommodation for gross proceeds of £7.04 million. The sale realised a profit in the current period, after costs, of £3.42 million in addition to £0.66 million of prior period rental surpluses realised since our acquisition of these industrial units in April 2018.
At Holyhead Waterfront, Anglesey, the detailed application and marine licence applications, submitted in October 2021, for a proposed development to include a 250-berth marina, 259 townhouses and apartments, marine commercial and additional A1/A3 retail units, were validated in January 2022. We expect a determination by the Local Authority in the autumn of this year.
Whilst it is difficult to predict the impact that the ongoing war in Ukraine will have on the real estate sector, its occurrence, in conjunction with the global shift towards low carbon energy, has strongly influenced the Government’s desire for more UK sourced power. The release, in April 2022, of their Energy Security Strategy sets out proposals for the provision of greater energy independence and security, by way of supercharging the deployment of cleaner and more affordable energy. This includes the provision of a £120 million Future Nuclear Enabling Fund to progress a series of projects as soon as possible this decade, including the Wylfa site in Anglesey, where talks were already ongoing between the UK and Welsh Governments and US energy and engineering firms Westinghouse and Bechtel.
If the UK and Welsh Governments eventually decide to support nuclear and / or other energy forms on Anglesey, our site on the Holyhead Waterfront and over 200 acres of currently brownfield but developable land at Rhosgoch and Parc Cybi are well positioned to support the significant residential and logistical provisions which will be required.
In December 2021, we announced that the Company had entered into a non-binding exclusivity agreement with Wholesale Fruit Centre (Bristol) Limited regarding the potential acquisition of a 14.7-acre development at the Bristol Fruitmarket Site in the St Philip’s Marsh area of Bristol, one mile to the east of Bristol Temple Meads. The initial agreement lasted for up to 5 months, which has now been extended to 24 May 2022. During the exclusivity period we will establish whether or not to proceed with the proposed acquisition. If the acquisition were to go ahead, it would be subject to us obtaining an agreeable planning permission for the site and as such the completion is unlikely to occur in the near term.
ESG Programme and electronic financial reporting
The impact that the real estate sector has on carbon emissions has been extensively reported and is increasingly affecting occupier and investor decisions. In order to guide our approach to sustainability for the development portfolio, the Board have established an ESG programme which forms a key part of each project and its constituent components – from project brief, through to design/specification, construction, operation and renovation. At all stages, the development, operations and asset management teams are required to assess their performance, innovate, evolve and perfect all practices against the ESG framework. Further details of the programme will be set out in the Group’s 2022 Annual Report.
As part of these arrangements, to avoid where possible the distribution in paper format of the Company’s Interim and Annual Report’s each year, the shareholders passed a resolution at the Company’s AGM in December 2021 to authorise the Company to serve notices or supply other documentation by electronic means. For those individual shareholders that specifically requested to continue to receive such documents in paper format the arrangements will continue as before. For all others these reports will be made available, as soon as practically possible after the Group’s results are announced each period, via the Company’s website.
Share placing
At the Company’s Annual General Meeting, held on 20 December 2021, resolutions were passed to enable the Company to complete the placing of 7,138,998 Ordinary shares of 5p each at a placing price of 150p per share, to enable the further progression of The Island Quarter project. This includes the continued development and fitting out of the first phase of the scheme at Canal Turn, bringing a new electricity substation to the site and, later this year, to part fund the equity component of the student accommodation development.
The premium received from each placing share over their 5p nominal value, net of fees paid in connection with the placing, resulted in a £10.16 million credit to the Company’s share premium account. At a General Meeting of the Company on 28 March 2022 a further resolution was passed to enable the cancellation of the share premium account, subject to approval of the Court, such that the amount cancelled can be credited to a distributable reserve. On 22 April 2022, an application was submitted to the Court to request the cancellation which is expected to be considered in late May 2022.
Outlook
The soon to be opening up and ongoing development programme at The Island Quarter site in Nottingham in conjunction with the resurgence of interest in a nuclear capability in Anglesey leaves the Group well placed to benefit from the post-pandemic economic bounce and strong demand for high quality, sustainable, UK real estate, particularly in the residential rental market.
Although the further advancement of our development portfolio will require a substantial investment by third-parties we are confident that there is significant interest which will become clearer over the year.
N J Hamway R T E Ware
Chairman Chief Executive
